The Government will give lower interest rate on small savings scheme. These schemes are NSC, PPF, Sukanya Samriddhi Account, Kisan Vikas Patra, time deposit etc. These are government saving scheme and it fixes the interest rate. The latest interest rate is applicable from the 1st Jan 2018. The government would again review the interest rate in the last week of March 2018.
New Interest Rate on PPF, NSC, SSY and Other schemes
The government has reduced the interest rate of small saving schemed by 0.2%. Thus, most of the schemes would give 0.2% less return. However, it has retained the same interest rate for some schemes.
Senior citizen Saving Scheme Would Give Same interest rate
The government has given relief to the senior citizens. It did not reduced the interest rate for senior citizen saving scheme. It is still at 8.3%. You may know that senior citizen account and Sukanya Samriddhi Yojana were getting highest interest rate among the all small saving schemes. But this time, the government has retained the interest rate of only senior citizen saving scheme.
Sukanya Samriddhi Yojana Would give Less Interest
Now Sukanya Samriddhi Yojana is not one of the most beneficial small saving scheme. The government has also reduced it’s interest rate. While it did not touched the interest rate of Senior citizen saving scheme. So the SSA account would earn only 8.1% per year. It is still better than most of the banks FD.
The post Office Saving Account would Give Same Interest Rate
The government has also not touhced the interest rate of post office saving account. You might know that post office one of the government department. And Small saving schemes of the post office is indirectly managed by the government. Therefore, it has retained the 4% interest rate of post office saving account.
|Scheme Name||Previous Interest Rate||Latest Interest Rate||Compounding Frequency|
|1-year Time deposit||6.8%||6.6%||Quarterly|
|2-year Time deposit||6.9%||6.7%||Quarterly|
|3-year Time deposit||7.1%||6.9%||Quarterly|
|5-year Time deposit||7.6%||7.4%||Quarterly|
|5-year Recurring Deposit||7.1%||6.9%||Quarterly|
|Senior Citizens Saving Scheme||8.3%||8.3%||Quarterly and Paid|
|Monthly Income Account||7.5%||7.3%||Monthly|
|Kisan Vikas Patra||75%||7.3%||Annually|
|Sukanya Samriddhi Account||8.3%||8.1%||Annually|
With this change the interest rate on small saving scheme have come down to the fixed deposits of the banks. Certainly it would reduce the charm of the small saving schemes. However, the banks may further decrease the interest rate on FD and RD.
Highlights of Latest Interest Rate on Small Savings scheme
- There is reduction of 0.2% across the schemes.
- Interest rate of saving account and senior citizens saving is not changed.
- The senior citizen saving scheme is still giving 8.3%.
- The saving account also give 4% interest rate. It persists.
- The Sukanya Samriddhi Account now gives 8.1%.
- The PPF and NSC would now give only 7.6%. However, these are still better than bank FD.
How Government Fixes Interest Rate
The government has linked the interest rate of the small saving scheme with the yield of the government bond. The yield tells you the latest earning rate from the government bonds. Because of this arrangement you can be sure about the saving into these schemes.
The government has always given better interest rate than the yield. That is why, PPF and NSC are still best investment to those who don’t want a risk. The PPF and NSC give 0.5% higher interest rate than government securities.
Now the government revises the interest rate of small saving scheme after ever quarter.